The Big Bank Waives Debit Card Charges for Small Shops


In yet another move to encourage digitisation amongst the SMEs, the largest bank in India, The State Bank of India has waived debit card acceptance charges for merchants with an annual turnover of Rs 20 lakh.

The move is targeted primarily towards a segment of population and small merchants, who have not yet experienced the convenience of card payments, the bank said. And, by actively canvassing the smaller merchants, SBI is trying to promote the acceptance of its 21.5 crore debit cards in shops. The merchant discount rate is the fee paid by the merchant on the card transaction.

The bank is also pushing to increase the penetration of card usage in shops in smaller cities. Over 70% of the bank’s card acceptance machines are in 4,400 centres.

In a statement issued on January 10, the bank said that it is committed to the government’s drive to promote digital payments. “There is no superstore in the country or the world, which does not provide PoS terminals to handle debit and credit cards. Small merchants, however, sometimes are not able to realise/perceive the benefits, and consider MDR charges a drain on their profitability,” the bank said in a statement.

The move by the bank to waive charges on debit cards but not extend the same benefit to credit card payments could lead to merchants making a distinction between credit card and debit card payments.

Given that the merchant discount rate (card charges paid by the shopkeeper) for debit card payments below Rs 1,000 have been cut to 0.25% and at 0.5% for payments up to Rs 2,000, it is likely that shopkeepers might discriminate between debit and credit card. Bank officials agree that this could lead to merchants accepting only debit cards for small value payments given that charges on credit card transactions are very high, but they say that debit cards are more prevalent than credit cards.